ST and Ericsson agree to break up joint venture

LONDON – STMicroelectronics NV and Ericsson AB have agreed to break up their 50:50 mobile phone chip joint venture. The two companies had been looking for a "strategic solution" for the joint venture for several months.

Ericsson (Stockholm) will take back the LTE 2G-through-4G multimode modem technology while ST (Geneva) will take control of the existing ST-Ericsson products excluding the LTE multimode thin modem ICs and certain assembly and test operations.

The two companies have agreed to try and sell off the connectivity business separately, which employs approximately 200 people, and close down the remaining parts of ST-Ericsson.

As a result it is expected that Ericsson will assume responsibility for approximately 1,800 employees and contractors mainly in Sweden, Germany, India and China while ST is set to takeover about 950 employees, primarily in France and in Italy.

ST-Ericsson employs about 5,000 staff according to its website with the implication that up to half that number could be losing their jobs. ST-Ericsson said it would carry out a restructuring of its current operations which could impact some 1,600 employees worldwide of which between 500 and 700 are in Europe.

The break-up is due to be completed before the end of the third quarter of 2013, a target date for achieving a resolution previously set by ST. ST said it expects to incur cash costs, including the covering of ST-Ericsson’s ongoing operations during the transition period and its restructuring costs, in the range of approximately $350 million to $450 million, slightly less than the previously provisioned $500 million the end of January 2013. As previously communicated, Ericsson has made provisions of 3.3 billion Swedish krona (about $500 million) to cover costs related to the implementation of the strategic option.

It was also announced that Carlo Ferro has been appointed president and CEO of ST-Ericsson, effective April 1, 2013, to succeed Didier Lamouche who, recently announced he was standing down to pursue other opportunities. Ferro is currently chief operating officer of ST-Ericsson.

ST said that the transfer of competencies from ST-Ericsson would strengthen its capabilities in application processors, RF, analog and power and help it address the fast-growing wireless semiconductor market.

Carlo Bozotti, CEO of ST, said the move would protect ST-Ericsson's business and reinforce relationships with key customers of both ST and ST-Ericsson.

You forgot QCOM. They have a sarong hold on the hi end market. And they are moving aggressively with many designs at the same time to take over the low end market. This will hurt Nvidia and MediaTek.
I don't think ST-Ericsson could match the workforce and resources that QCOM is putting on their developments effort. ST or Ericsson solution will be history very soon unless they find a customer for their solution ...

How is smartphone SoCs a "booming an profitable" market? It is being commoditized and margins is brutally pushed down.
TI has exited, so has Freescale. Marvell is fighting for a hold after loosing RIM. The two largest customers, Apples and Samsung do inhouse designs. At the same time it is beeing attacked from the low end by China players like MediaTek etc.

What a bunch of numpties! How on EARTH could ST-Ericsson fail?? All I can say is that there must be some severe incompetence at the top.
They are in a booming and profitable market. They have everything needed to make excellent products. Sure, they have been unlucky with the lunacy of Nokia and move towards the Samsung/Apple duopoly, but all that is starting to come to and end and competition is returning between mobile phone manufacturers (hence benefiting the horizontal integration business within which ST-Ericsson was involved). If anything, surely now would have been the ideal time to invest in ST-Ericsson instead of collapsing it! Seems to me very short-sighted and perhaps also a symptom of the yearly cycle of the bean-counters, something which I don't think should apply to industries such as semiconductors where it takes more than a year for investment dividends to pay off.
Instead, what we are left with is the complete decimation of European semiconductors, with what should have been the most profitable divisions of ST, Ericsson and Philips/NXP (amongst several other acquisitions) wiped out in one swoop!

@pelle
While the products as they are go to STMicroelectronics, the LTE modem baseband technology is returning to Ericsson.
I think Ericsson would be in the market to sell it on or invent a licensing business.

Apparently Samsung passed on taking over ST-Ericsson as it was. What about after the split?
App processors are a dime a dozen but proven LTE basbands are pretty rare.. There is at least one company with deep pockets who might need one...
How locked in would ST-Es designs be to STs fab processes?